Hence, just from this raw data it is not the top 1% that should be demonised, but the 75th to 99th percentiles.

But it's not eye-catching and highly unpopular to go after the upper middle class. How would one say, "You didn't build that"?

2. The same table also suggests that it is unemployment which is giving rise to this data - in 2000 82.4% of the population was working, while in 2011 only 73.2% was working.

What could easily have happened is that part-time jobs at the $15-20k level were slashed, as were associates at the $40-50k level. This would have then automatically increased the SHARE of the top 25% of earners, while not necessarily increasing their absolute wages (it declined, even for the top decile on average).

This is why looking at income shares (and even absolute incomes for various deciles since the population is changing) is so difficult and frequently misleading - it does not take into account (un)-employment levels.

"From the 1970s to the late 1990s inequality grew because the incomes of the rich were growing much faster than the incomes of those at the median and below—but incomes at the median and below were growing. Since the late 1990s, however, incomes across the income spectrum have stagnated and declined, from the 10th percentile right on up to the 95th."

You need to break it up. Work earnings have been falling the 1970s, working their way up from high school dropouts to high school graduates (1980s) to college graduates (early 1990s) to everyone but those at the top (2000s).

But many of those in vested generations had places that exempted them from the decline, meaning the decreases are generational -- each generation earning less than similar people in the generation before. Starting with the second half of the baby boom.

This did not affect total household spending and lifestyle until now. Why? Because it was covered up at first by having more family members in the labor force, allowing total earnings to keep rising. And then by lost retirement benefits, which did not affect cash pay and thus cash wages. That should have led to an increase in saving and cut in spending to offset it, but it did not.

Finally, in the 2000s, even household cash income started to fall. The last phase was an explosion of household debt for the middle class, and a sell off of any savings (HELOCs, borrowed against 401Ks).

And why is the 1.0% percent so mad at Obama? Because starting in 2008, even the income of the 1.0% percent started to fall. If they could break it out, it is only the 0.1% that is getting ahead now.

There's no reason convergence shouldn't affect everyone. With more competition from abroad, there are bound to be fewer rents to collect at home. Smart, productive Americans are competing with smart, productive Indians now.

Without debt for consumption, trade would not have led to falling living standards overall for the simple reason that smart Indians could only sell to us to the extent that Americans, smart and otherwise, sold to someone else to pay for it.

If the international reserve currency is your national currency, the trade deficit is based in. And convergence is convergence whether accelerated by debt or not. Once the technology exists to cheaply move goods and services around the world, the only alternative to international competition on the basis of price is rigorous protectionism which can keep wages high but raises prices to match. No better.

Hedgie, can I stay in your pool house if needed? My personality is as caustic as chlorine.

Income data from the Census Bureau is incomplete, to the point of being misleading. It measures only salary and wage income, ignoring in-kind benefits such as health insurance. For the median household, health insurance alone represents nearly 20% of total income, and its growth has more-than offset the slight fall in cash income.

Data from the CBO gives a far-better picture of income, albeit with some delay

I didn't know I could pay rent and buy food/clothing with my employer provided health insurance! Wow! And what about all those folks working jobs where they get no insurance? That is a sizable portion of the below median income crowd... so, no, your contention that we include health insurance as income for gauging wealth inequality is not a good idea (unless you're trying to fool people into thinking inequality ain't as bad as it really is).

Health insurance may not be fungible, but it does free up money to be spent on other things. A household making $50,000 with health insurance will have greater disposable income than one that makes $50,000 without health insurance.

It's therefore disingenuous to suggest that it has no economic value, or should not be included when measuring income.

You are assuming that equal value was received for that health spending, and forgetting that pre (and post?) Obamacare younger generations were losing that health insurance even as they were required to pay for it for others.
Not only did more and more firms not offer that benefit, but those that did either charged workers more and more for it out of their own pockets or hired new workers as "independent contractors" without benefits.

"You are assuming that equal value was received for that health spending"

I'm assuming that those workers would otherwise have had to purchase insurance out of their cash income, not that they're getting $1 in QALYs for every $1 spent on their policy.

"Not only did more and more firms not offer that benefit, but those that did either charged workers more and more for it out of their own pockets or hired new workers as "independent contractors" without benefits."

This is all factored into the CBO's data, and probably explains why it takes several years to publish.

The US data here contradicts a study by M/s Dollar & Kraay (how ironical!) who talked about 'average' family incomes increases leading to proportionate family income increases in the last quartile (this would factor for a natural skew in the income increase of the top decile).This, one would assume, provides for the 'trickle down' effects to the last quartile to also 'proportionately' enjoy an increase - more spending,more jobs, more business, etc. However apparently 46 % of New York is below proverty line, and as for Germany - it has a higher poverty level than the Czech republic!So clearly few facts do belie the findings in the mentioned study.Though for the whole world per se, it could be very well hold true.

The real horror is shown in the 50th percentile. Household income has only increased by about 18% since 1967 but in 1967 most American households had only a single earner! In 2012 most American households have two earners. This means earnings have fallen drastically over the period... they haven't been rising at all!

You really need to plot this on a vertical Log scale to see what is happening - only % changes should be compared. If this is done inequality still grows but my much less than it looks above. And changes in the 10th % are hard to see on your linear scale anyway.

Another interesting story is that when markets fell, the cry arose that this "solved" the inequality problem and/or that "see, the markets unfettered correct the problem." And that was a lie which the passage of time reveals.

The chart doesn't square with a statistic that is making the rounds that 95% of the income gains since the recession have accrued to the top 1% ... maybe a chart of the 99th percentile would show this out. No matter what, the middle class are becoming more and more frustrated and resentful, not a good prescription for continuing social cohesion.

- kill the protected pharmacy system - let Amazon (& other providers) sell drugs online, with their own compatibility/combination-safety checks

- make it much easier to get through planning & zoning restrictions/ make it much easier to build new buildings (cut the cost of housing/ cut the cost of rent)

- raise retirement ages

- ration public healthcare spending tightly

- slash military spending

Etc

Beyond that, there is some scope for the introduction of a VAT (which would take far more proportionately from higher income households than any modification of the income tax schedule), and perhaps for providing a minimum personal income to all Americans. ($12,000/ year should be the 0th percentile for households rather than the 10th percentile.)

VAT is a tax on value added. All businesses must pay VAT on the difference in value between inputs and outputs in any production process.

A VAT without reduced rates or exemptions will raise an equivalent proportion of GDP (e.g. 25% VAT would raise 20% ((1+.25)/1) of GDP in tax revenue).

With VAT, tax revenue is in proportion to the value generated or extracted. Unlike income tax, VAT can't be avoided by rich people.

Lower income households should be net recipients from any tax system anyway, providing tax revenue is used primarily (1) to provide universal minimum incomes, (2) to provide social insurance or (3) to invest in public education, public health or public infrastructure.

VAT, by its nature, is more effective & progressive and less distorting than income tax.

(1) if an investment is in productive economic activity (e.g. a business), then the value added by that business

(2) if the money valuations of assets owned by an individual simply appreciate or fluctuate, then that is not income. It is just a shift in relative values. It's not as though my house has turned into more house just because houses got pricier; likewise with gold.

Income is new value creation - and VAT actually taxes that properly, unlike income tax. Mere shifts in asset prices (upwards or downwards) should have nothing to do with taxation.

Value added is basically wage plus return on capital. The split is roughly 70-30. Compare today's system, a government fully funded through VAT would see more of the burden shifted from labor to capital.

The remaining 45-60% of GDP is split between VAT, cost of non-labour inputs (e.g. imports, rent, energy), indirect taxes on business that are not employment related (e.g. land taxes), interest payments (servicing bonds & debts), direct taxes on business (e.g. corporation tax, business rates) and profit (return to equity investors).

In other words, any given rate of VAT will raise more than three times as much as an equivalent rate of tax on income, while causing far less distortion, taxing high earners proportionately and leaving far less room for tax avoidance.

Social Security - Until you reach the full retirement age, for each $2 you earn in 2013 above $15,120, you lose $1 of your annual Social Security benefits.

Social Security - Some people have to pay federal income taxes on their Social Security benefits. This usually happens only if you have other substantial income (such as wages, self-employment, interest, dividends and other taxable income that must be reported on your tax return) in addition to your benefits.

High incomes are typically directly contingent on business profits or consumer demand.

Below the 95th percentile, wages (rather than returns on assets) increasingly dominate income - and wage contracts are quite stable/ can only be exited or modified with a time lag.

And if wage contracts have already been modified with expectations of growing demand & profit, then wages will briefly command a growing share of output (and so the top income quantiles will temporarily fall faster than the rest as growth begins to tail off).